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Should First-Time Homebuyers Build Their New Homes?


Americans are very keen on having the newest thing whether that is a car, following a fad or even buying a house. Many people believe that the American dream is to build their own house one day. What if you financially could swing building a house as your first home? Should you do it? That depends on how much you can afford and whether you’re financially ready to tackle more than just the purchase price of a home. You may want to first work with a financial advisor who can help you figure out the right financial moves to make and whether you can afford to build.

The Cost of Building a New Home

There is a lot to be said for a new house. They appreciate faster than an existing house, for example. However, they generally cost more per square foot to build or buy than existing housing. Everything in a new house has never been used, making you the first to use them. This also means those amenities might not be as trustworthy as those that have stood the test of time.

That’s the thing debating between buying or building new versus buying a used home. For every positive, there is a negative to match. First-time homebuyers should take everything into consideration since they’re new to the home-buying game. When you buy a house you can get an inspection and know exactly what you’re dealing with. Building a home may bring unexpected expenses along the way that you weren’t counting on.

Building a new home generally costs $30,000 – $40,000 more than buying a similar existing home. It’s important to know you can afford to build a home before you get started. Many people end up abandoning their new build every year after they’ve poured a lot of money into it because they can’t afford the total cost

Expectations Are Difficult to Match

Should First-Time Homebuyers Build Their New Homes?

When people buy a home they have a certain amount of expectations that they are wanting to be met when the home is complete. This is much different than buying an existing home because you go into that experience trying to see if the house can fit you. When people build they expect to fit their house. When they don’t then they are either not satisfied or spend more than they should make meet their expectations.

It’s a lot easier to spend extra dollars on your home to fit your expectations if you’re in the middle of a build process than it is if you’re just buying an existing home. It’s a completely different mentality and you can instruct your builder to make changes to your original plan without even understanding what it will cost you. This is why inexperienced people may not want to consider building a home.

Custom Homes Aren’t Always Better

My wife and I once considered an 1820’s farmhouse with some more modern additions. We loved the property and the look of the house from the outside. The drawback? I would have had to bend over to pass through the 6-foot tall doorways on the second floor. Plus, my head was an uncomfortable 1 inch below the 6.5 foot ceilings.

On the other hand, my sister’s first home was a semi-custom house in a development in Arizona. She chose from a set of models and customized the floor plan and the interior details. I remember how thrilled she was that “her” house would not have any sharp corners. For an extra couple thousand dollars, all the outside corners of her interior walls would have rounded edges.

A couple of years after being in that house, I asked if she still loved her custom rounded corners. She shrugged and said she really didn’t think about them anymore. She didn’t even really remember why she had thought they were the greatest things in the world, let alone worth paying extra for.

That’s the way new construction can be. We get caught up in the excitement of creating something uniquely our own, especially for a first-time homebuyer. Only later do we realize that it doesn’t make a bit of difference in how we enjoy our homes. The couple thousand dollar rounded corners brought my sister far less joy than the dog door she later put in her living room.

Location Is Still the Most Important Thing

Should First-Time Homebuyers Build Their New Homes?

The decision to build or buy involves much more than rounded corners or custom kitchens. This might be hard for a first-time homebuyer who wants their first home to be perfect. However, the old adage in real estate says the three most important things to consider are location, location and location.

A big, beautiful custom home that requires a 2-hour commute may not be as attractive as an existing home 20 minutes away from everything. Especially after you’ve lived in your home for a year, you might favor the shorter commute much more.

The Bottom Line

Only one person can answer the question between buying and building, assuming your finances are strong enough to do either. Ask yourself all the above questions and more. Be honest with yourself when you answer, too. Weigh everything, not just cost. Consider the neighborhood or town, the quality of schools (even if you don’t have children – you’ll want to sell someday!), the commute, the community and the characters (neighbors matter). If you can afford to build and buy then the only person who can tell you whether it’s right is you.

Tips for Buying a Home

  • Whenever you’re making a huge financial decision you may want to consider how it plays into your overall financial plan. Getting help from someone like a financial advisor can go a long way to helping make the right long-term decision. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Part of the process for most people when buying a house is finding the right mortgage. Use our mortgage calculator to see how much it will cost you to build the home you want.

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